SPORTS N STUFF

As I understand Sportsbooks and bookmaking, the goal is to have equal money bet on both teams. When the wagering is equal on both teams then the bookmaker can’t lose.

Yesterday on 60 Minutes they featured one of the most succesful sports gamblers of all time. The teaser said he was so good some sports books won’t take his bets. That can’t be true unless his wagers are so large he puts the sportsbook in a lopsided position?

• I watched that program. Fascinating.

  Indeed his wagers ARE so large that they DO put the sports books in a lopsided position. To get around the sports books knowing that it is him, the program explained that he has a huge crew of people making various bets on his behalf. They explained that the amounts of his bets are so big that his action alone is enough to affect the lines on the games.

  In fact, the program described how this guy sometimes uses that to his advantage. For example, if he wants to bet a lot on the favorite, but he doesn’t like the line, he’ll place about $40,000 or so on the underdog until the line moves down enough. Once the line moves to what he believes is favorable, he will then blast the casinos with every mule he’s got. He’ll get a couple hundred thousand bet on the favorite faster than the casinos can change the line back again!

  He’s doing something right if he can afford an 8-million dollar private jet for he and his wife!

• Actually the idea that bookmakers like to try and balance their books is something of a misconception. Many bookmakers will allow their books to go lopsided frequently. Let me digress to a quick explanation of how bookmaking works. In a sporting event a bookmaker makes an assessment of the probability of team A beating team B. Lets say for arguments sake the odds are even, 50:50 chance, that is, if the match is repeated 1000 times each team will win roughly 500 times. Now when the bookmaker offers he does not offer odds of 2 (I’m using decimal) on each team, he offers odds something like 1.91. So assuming that people bet equally then he uses the losers money to pay off the winners and keeps a cut for himself since the losers lose more than the winners win. Lets imagine a situation where everyone bets on a team that they like, and no one bets on the other team, despite the fact that they have the same chance of winning. The bookmaker has a choice, either he moves the odds to encourage betting on the other team, or he leaves the odds and lets the match run with a liability.
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  It turns out that the most profitable thing to do a lot of the time is to stick by your assessment, it doesn’t really matter if the betting is one sided and he loses sometimes, because he could also win when the betting is one sided, and if the assessment is accurate then on average he will make a profit even if he never balanced a book because in the long run he is always paying people out less than they bet on average. If you think about some weird sport such as B league Polish soccer, the betting on this will almost never balance, only a few people place bets, and the bookmaker doesn’t want to move the price to try and balance the book, so they frequently accept an unbalanced book.

  Here comes this brilliant gambler making huge bets on B league soccer, the professionals will only bet when the price for a team is wrong, so instead of taking bets and on average making a profit the bookmaker starts to lose out on average. Eventually they will limit his stake on low volume markets such as B league soccer, but still allow him to bet on large markets such as MLB money lines for the reasons that you stated.

  I work in a bookmakers and I don’t think we have ever balanced any book, we are always standing to lose if a certain team/horse/player wins. But because we always pay out at less than the probability of the event occurring we are still in profit! I also trade sports bets (backing/laying/arbing blah blah blah) and have been banned from many online bookmakers. Out of about 50 I signed up to originally I can only use about 10 now because I have entered long term profit by placing large bets on poorly priced markets.

  Obviously PDQ watched the program but I hope this enlightens you further. Thanks for an interesting gambling question in this section!

• Another piece of this is that the various bookmakers do not act in isolation. When a bookie has more bets on a particular outcome than he can financially handle, he lays off some of this to other bookies. This is equivalent to the subject of reinsurance in the insurance world.